Sustainable finance and resilience reporting insights
By Ludwig Federigan of Manila Times
THE phrase "climate change changed my life" hit me when I moderated the "People of Impact: Climate Change" discussion with venture capitalist and circular economy champion Carlo Delantar, Impact Hub Manila Chief Executive Officer Ces Rondario and House Deputy Speaker Lorna Regina "Loren" Legarda. It provided an impetus to look back on how I have been heavily involved in the environment, climate change and sustainability sphere for almost a decade.
As shared in a previous column, sustainability is meeting the needs of the present without compromising the needs of the future. It speaks further of three pillars: environment (planet), social (people) and economic (profit/prosperity).
I had the opportunity to be part of the external assurance panel that reviewed Maynilad Water Services Inc.'s sustainability report three years ago, becoming a firsthand witness to how a utility embraced and practiced a sustainability framework in the organization and the communities where it operated.
Sustainable finance measures such as Bangko Sentral ng Pilipinas (BSP) Circular 1085 issued in 2020 are not only a welcome but a timely development for the business community. The BSP directive recognizes the different risks - societal, economic, environmental and financial - brought about by the daunting challenges of the climate crisis and now - although not mentioned - the global health emergency.
Sustainable finance sets into motion the opportunity for banks, regardless of their size - universal, commercial, thrift, rural, etc. - to embrace sustainability and embed/practice these standards within their organizations. Given the volatility, uncertainty, complexity and ambiguity of current circumstances, sustainability is the language of today.
While we are certain that several universal and commercial banks have started adopting sustainability frameworks within their organizations, it is particularly important to institute the same in their lending operations. This will ensure that their clients' proposed projects are assessed and evaluated using sustainability-influenced matrices. They can also influence clients - whether existing or new - to pursue projects that will not only generate huge returns but also benefit the community and the environment.
We expect that the BSP directive will be supported by civil society and nongovernment environmental organizations, the academe and the scientific community. The present challenges that we are facing are so daunting that an appropriate response like this is necessary.
Not all directives are made perfect and without a few challenges, one of which is the penalty to be imposed on banks who do not align themselves with the circular. But as one of my new BSP acquaintances mentioned a few days ago, the initiative is "part of the first wave" that, for me, implies there will be a follow-through.
The Global Risks Report showcases the top 10 threats in terms of likelihood and impact. In the 2021 edition, the World Economic Forum publication listed extreme weather events, climate action failure, human environmental damage, infectious diseases and biodiversity loss as the top risks in terms of likelihood. Infectious diseases, climate action failure, weapons of mass destruction, biodiversity loss and natural resource crises are the top risks in terms of impact.
Multiple studies have placed the Philippines as one of the most vulnerable countries to natural hazards and climate risks. The narratives include the Institute for Economics and Peace tagging the country as having the highest risk for multiple climate hazards (2019 Global Peace Index) and a cyclone hot spot (2020 Ecological Threat Register), and fourth most-affected from 2000 to 2019 in Germanwatch's 2021 Global Climate Risk Index.
Many natural disasters, which have caused the loss of millions of lives and livelihoods, have battered the Philippines long before the terms sustainability and resilience made it to the dictionaries of disaster risk and crisis managers.
Resilience, in plainer language, is the ability of people, organizations and communities to bounce back after adversity or a tragedy in the shortest period possible.
Under sustainability, reporting is a mechanism for an organization to disclose and communicate its environmental, social and governance objectives and the path toward achieving those goals. One of the pitfalls I have noticed in sustainability reporting is that the disclosure of information - even if one uses the Global Reporting Initiative - is voluntary.
Resilience reporting is a proposed concept. If the intent is to contribute to disaster risk management, it should continue to capitalize on the 3Ps - people, planet and prosperity - as benchmarks to ensure that the organization is prepared, has planned and is ready to absorb, recover and adapt to natural and climate risks.
In essence, the proposed reporting mechanism should be able to answer the following:
For people, are those in the organization personally resilient in times of adversity and challenges? Are they prepared? Are they ready to absorb any unforeseen challenge? Are they willing and ready to adapt?
For the planet, are sustainability practices embedded in the organization's operations and strategy? Are the organization's facilities and infrastructure resilient to adversity and natural events?
For prosperity, how much of the organization's net profit is shared with the communities where it operates? How does the organization assist and help strengthen the resilience of the community?
The challenge is whether resilience reporting will have more of an impact than previous initiatives.
The author is the Executive Director of the Young Environmental Forum and a Non-Resident Fellow of Stratbase ADR Institute. He completed a climate change and development course at the University of East Anglia and an executive program on sustainability leadership at Yale University. You can email him at ludwig.federigan@gmail.com.